Data

Date:: 30-04-2001
Country:: Arbitral Award
Number:
Court:: Ad hoc arbitration (San José, Costa Rica)
Parties:: Unknown

Keywords

LONG-TERM CONTRACTS - JOINT-VENTURE AGREEMENT - BETWEEN A COSTA RICAN AND A FRENCH COMPANY - ARBITRATION CLAUSE STATING THAT DISPUTES SHOULD BE SETTLED "ON THE BASIS OF GOOD FAITH AND FAIR USAGES AND WITH REGARD TO THE MOST SOUND COMMERCIAL PRACTICES AND FRIENDLY TERMS" - APPLICATION BY ARBITRAL TRIBUNAL OF THE UNIDROIT PRINCIPLES DEFINED AS "THE CENTRAL COMPONENT OF THE GENERAL RULES AND PRINCIPLES REGULATING INTERNATIONAL CONTRACTUAL OBLIGATIONS AND ENJOYING WIDE INTERNATIONAL CONSENSUS"

BREACH OF THE DUTY TO COOPERATE IMPLIED IN A JOINT VENTURE AGREEMENT - REFERENCE TO ARTICLES 1.7, 1.8, 4.1, 5.3 AND 5.4 [ARTS. 5.1.3 AND 5.1.4 OF THE 2004 EDITION] OF THE UNIDROIT PRINCIPLES

DAMAGES FOR LOSS OF A CHANCE - REFERENCE TO ARTICLE 7.4.3 OF THE UNIDROIT PRINCIPLES

Abstract

A French company and a Costa Rican company agreed to participate in a public bidding procedure for the construction and operation on an exclusive basis for a ten-year period of centers for technical revision of vehicles in Costa Rica. The contract was finally awarded to a third party. According to the Costa Rican company the adjudication was improper but the French company refused to join its partner in challenging the adjudication before the competent authority, thereby preventing the Costa Rican company from concluding the proceedings. The Costa Rican company commenced arbitral proceedings against the French company alleging breach of the joint venture agreement and claiming compensation for the harm suffered including loss of profits it could have expected to make over the ten-year period of time.

In their contract the parties had agreed that any dispute should be resolved “on the basis of good faith and fair usages and with regard to the most sound commercial practices and friendly terms”. The Arbitral Tribunal decided to apply the UNIDROIT Principles which it considered to constitute “the central component of the general rules and principles regulating international contractual obligations and enjoying wide international consensus”.

As to the merits the Arbitral Tribunal found that the French company’s refusal to join the Costa Rican company in its appeal against the decision of the adjudicating authority had indeed breached its obligations arising from the joint venture agreement, and to this effect it referred to Articles 1.7, 1.8, 4.1, 5.3 and 5.4 [Arts. 5.1.3 and 5.1.4 of the 2004 edition] of the UNIDROIT Principles. It also invoked the general principle of the prohibition of venire contra factum proprium without however quoting the relevant provision of the UNIDROIT Principles (which was only included in the 2004 edition not yet published at that time). As to the plaintiff’s claim for damages for lost profit, the Arbitral Tribunal held that the expected gains were too uncertain to be compensable in their entirety and therefore awarded damages only for the loss of a chance, referring expressly to Article 7.4.3 of the UNIDROIT Principles.

Fulltext

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“Not only national statutes and jurisprudence are applicable to this case, but also regulations of international trade that are essentially conformed by the principles and usages generally admitted in commerce which the parties agreed upon in the tenth clause of the letter of intent stating that they would act, amongst themselves, on the basis of good faith and proper customs and with regard to the most sound commercial practices and friendly terms.” This statement enables the Tribunal to use such rules as has been done by the I.C.C. International Court of Arbitration in similar cases (Cf. Awards 8908 of 1996 and 8873 of 1997; International Court of Arbitration Bulletin, vol. 10/2-Fall-1999, p. 78 ss.).

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“The reasons why this Tribunal considers the UNIDROIT Principles of International Commercial Contracts to be the central component of the general rules and principles regulating international contractual obligations and enjoying wide international consensus, which constitute the proper law of the contracts, are manifold: (1) the UNIDROIT Principles of International Commercial Contracts are a restatement of international legal principles applicable to international commercial contracts prepared by a distinguished group of international experts coming from all prevailing legal systems of the world, without the intervention of States or governments, both circumstances contributing to the high quality and neutrality of the product and its ability to reflect the present state of consensus on international legal rules and principles governing international contractual obligations in the world, primarily on the basis of their fairness and appropriateness for international commercial transactions falling within their purview; (2) at the same time, the UNIDROIT Principles of International Commercial Contracts are largely inspired by an international uniform law text already enjoying wide international recognition and generally considered as reflecting international trade usages and practice in the field of the international sale of goods, which has already been ratified by almost 40 countries, namely CISG; (3) the UNIDROIT Principles of International Commercial Contracts are specially adapted to the contracts subject of this arbitration, since they cover both the international sale of goods and supply of services; (4) the UNIDROIT Principles of International Commercial Contracts have been specifically conceived to apply to international contracts in instances in which, as is the case in these proceedings, it has been found that the parties have agreed that their transactions shall be governed by general legal rules and principles; (5) rather than vague principles or general guidelines, the UNIDROIT Principles of International Commercial Contracts are mostly constituted by clearly enunciated and specific rules coherently organized in a systematic way.”

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Source

V. Pérez Vargas - D. Pérez Umana, The UNIDROIT Principles of International Commercial Contracts in Costa Rican Arbitral Practice, Uniform Law Review, 2006, pp. 181-183.}}